Which of the following correctly describes fractional reserve banking?
A. The federal government only insures a fraction of the deposits at most banks.
B. Banks keep a fraction of their loans with other banks to maintain the quality of their loan portfolio.
C. Banks can loan out all but a small fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.
D. Banks can loan out all but a fraction of its own money, and all but a fraction of all money deposited at the bank.
Answer: D
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The full employment level of GDP is sometimes referred to as "potential GDP."
a. True b. False Indicate whether the statement is true or false
If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $12,000 to purchase those identical goods in 2015, then the inflation rate from 2005 to 2006 is
A. (100-83.3)/100*100%=16.7%. B. (100-100)/100*100%=0%. C. (120-100)/100*100%=20%. D. unknown given this data.
When comparing the distribution of wealth to the distribution of income, it can be noted that
A) the distributions are about the same. B) the measurement of income is much less accurate than the measurement of wealth. C) the measurement of wealth is much less accurate than the measurement of income. D) wealth does not generate income.
M1 does not include
A. currency. B. travelers' checks. C. MMMFs. D. transaction accounts.